How to Start an Online Auto Parts Business

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With roughly 276 million vehicles in operation in the United States, collisions and breakdowns are a fact of everyday life. Auto parts business opportunities exist nationwide, including franchises and independent stores. The ease with which people buy and sell on the internet could mean that an online auto parts business is right for you.

Define Your Target Market

It's not hard to find an auto parts store. Franchises such as AutoZone and Advance Auto Parts have stores nationwide. Customers also get auto parts at dealerships, independent shops and online. Identify your prospective customers and figure out what you can provide that they can't get anywhere else.

You may specialize in parts for foreign or vintage cars or provide outstanding customer service, tracking down hard-to-find parts that customers seek. Identify your target customers and how you will reach them.

Look Beyond the US

Worldwide, the car parts industry is worth approximately $58 billion. Besides the U.S., Italy, Australia and the tiny, wealthy countries of Monaco and San Marino are among the biggest markets. China, the Middle East and South America are also enormous markets. With an online auto parts business, you can serve customers anywhere.

Name Your Company

Choose a name that immediately identifies what your business is all about. For example, Midwest Antique Auto Parts gives customers a general idea of your location and tells what kind of merchandise you sell. Conduct an internet search to make sure your chosen name is not already in use.

Start With a Business Plan

A written business plan helps you with the decision-making in many aspects of your business. If you plan to seek financing from a bank, investors or other lenders, they will want to see your business plan to understand how your business will be managed.

Look online for templates for small online businesses. A business plan should contain the following details:

  • Executive summary: A brief statement about the business and the customers served. For example, "Bug Lovers Auto Parts is a new online company that, upon commencement of operations, will provide Volkswagen Beetle owners with quality service and a source for vintage Beetle parts and accessories."

  • Company ownership: Who owns the business and what form it takes. For example, "Bug Lovers Auto Parts is a California corporation, subchapter S, owned by John and Jane Jones."

  • Startup summary: A list of startup costs. Typical startup costs include computer hardware, software setup and support, website development, office equipment and furniture, storage space and opening inventory. You need a balance sheet that shows total funding required, assets and liabilities. Describe your starting inventory and how and where it will be stored.

  • Products: Type of products sold, how you'll distinguish yourself from competitors, how you'll advertise products on your website and how you'll source your offerings.

  • Market analysis summary: Current market for your products and future trends.

  • Strategy and implementation summary: How you'll build awareness and advertise your business, manage the ordering process, ship merchandise and create any business alliances. You need a sales forecast for two or three years.

  • Management summary: Role of each person involved in the business.

  • Financial plan: Expenses, projected profit and loss, projected cash flow and projected balance sheet.

Getting Started With an Online Business

Any online enterprise, including an auto parts business, needs to complete certain steps to begin operations. These include:

  • Obtaining a Federal Tax ID number (EIN): Visit the website of the Internal Revenue Service to obtain a tax ID number. The application is free, and you receive your unique identifier within two business days.

  • Registering your business: Check with your local government at the city or county office to find out the requirements where you live. A local office of the Small Business Administration (SBA) can help you navigate the registration process.

  • Registering your domain name and building a website: Use an online web-hosting service such as GoDaddy, SquareSpace or Wix. Look at several sites to compare pricing, services and ease of website design.

  • Photographing your merchandise: You don't need to be a professional photographer, but you do need good quality pictures that show customers what's for sale. Use your smart phone and photograph items in good light against a white background. You may want to show an item from different angles or provide close-up detail.

Auto Parts Drop Shippers

Unless you have a huge warehouse to store inventory, it makes sense to use auto parts drop shippers when customers order new items. Drop shipping keeps your costs low because you don't need to invest in manufacturing equipment or tie up money in inventory.

Tips

  • Drop shipping is a means of supply management by which the seller arranges shipment to the customer directly from the manufacturer or wholesale distributor.

Here's how drop shipping works:

Customers email a request or complete an order form online. As the auto parts dealer, you contact the manufacturer, who will ship the part directly to the customer. The customer pays the cost of the part and any freight and insurance charges. Typically, the dealer charges a credit card at the time the order is shipped.

You can provide the customer with a tracking number. Although you can advise customers of delivery times, you cannot guarantee them because the shipping is not directly under your control.

Consider a Drop Shipping Company

Several companies have emerged that handle the drop shipping for a wide variety of businesses, including auto parts. Oberlo is one example. An Oberlo account is free (although the site's $49.95 how-to e-course is recommended). Oberlo helps you source and price products, develop a website, build web traffic and facilitate customer purchases through Shopify.

Tips

  • Shopify is a Canadian-based e-commerce platform where anyone can set up an online store and sell products.

Auto Parts Drop Shipping Companies

You may want to do business with a drop shipper that specializes in automobile parts. NPW/REW and Keystone Automotive Operations are two such companies doing business in the U.S. NPW and Keystone work exclusively with businesses; they do not sell car parts directly to consumers.

When you search "auto parts drop shipping companies" on the internet, you get a long list of results. Do your research before choosing companies to work with. Consider joining the Automotive Distribution Network, a Tennessee-based company that works with more than 3,500 parts stores and auto service centers across the country.

Sourcing Used Parts

Sourcing used parts for classic and vintage cars can be more challenging than ordering new parts from a manufacturer. Building a network of classic car aficionados can help you when you search for a rare part that a customer requests. Get to know people in auto salvage yards. Talk with people at classic car shows and vintage car clubs. See if there is an auto parts business for sale; the seller may be willing to sell inventory to you.

There are magazines dedicated to classic cars; all have classified sections listing cars and parts for sale. Popular magazines include Hemmings Motor News, Hemmings Classic Car, Classic Trucks, Old Cars Report and Collectible Automobile. Large public libraries may carry one or more of these titles, but if you're in business, you probably want to purchase a subscription.

You can also source used parts through general auction sites such as eBay or websites dedicated to selling car parts online. As is the case with any online business transaction, you should research the companies you deal with before sending money or sharing credit card information. Find out the company's policies on delivery terms, satisfaction guarantees and returns.

References

About the Author

Denise Dayton, M.S., M.Ed. is a freelance writer specializing in careers, education and technology. In addition to writing for corporate clients, she has published articles in Library Journal and The Searcher.